Corus agrees to sell Séries+ and Historia to Bell Media for $200 million

Bell Media, Canada’s largest television broadcaster, is getting even bigger by acquiring two French-language services from its closest English-language competitor.

Bell and Corus Entertainment announced Tuesday that they have a deal whereby Bell acquires Séries+ and Historia for a price Corus values at about $200 million, subject to closing costs.

The deal requires approval by the Competition Bureau and the Canadian Radio-television and Telecommunications Commission.

That could be difficult, because of the history of the two services. The two were launched in 2000 as a joint venture between Astral Media and Alliance Atlantis. Alliance was then bought by Canwest, then Canwest’s television assets were bought by Shaw. Astral held on to its half of the ownership stake until it was bought by Bell in 2013. As part of its (second) proposal for the acquisition, Bell and Shaw each agreed to sell their half of Séries+ and Historia to Corus.

Now Bell wants to buy it all back. And at a discount, too. When Corus bought them in 2013, each half was valued at about $140 million, for a total price of $280 million. This transaction would be a savings of 29%. PBIT earnings for Historia and Séries+ were $29,881,221 in 2013 and $21,427,553, or a 28% decrease. The change was due mainly to a sudden surge in Séries+’s programming expenses in 2015-16 and a slow decline in ad revenue for both channels.

Corus is selling primarily to cut down its debt, as it says in its statement, but also because the channels are “not core to advancing Corus’s strategic priorities at this time.” The main reason for that is language. Other than these channels, Corus’s only French-language assets are the bilingual channels Teletoon and Disney.

“In the 18 months since Corus acquired Shaw Media, we have demonstrated a resolute commitment to de-lever our balance sheet to 3.5 times net debt to segment profit by the end of fiscal 2017 and 3.0 times by the end of fiscal 2018,” said Doug Murphy, President and Chief Executive Officer. “We have successfully accomplished the first step in our journey through the disciplined execution of our integration plan and ongoing advancement of our strategic priorities in fiscal 2017. As we reviewed our portfolio of assets this year, we determined that while Historia and Séries+ are excellent channels, they are not core to advancing Corus’ strategic priorities at this time. Furthermore, the increased financial flexibility this transaction provides will enable Corus to accelerate our transformation into an industry-leading integrated media and content company.

Corus was embroiled in controversy recently after news came out that Séries+ and Historia would no longer be commissioning original series. It’s unclear if that decision was made in anticipation of this announcement (La Presse first reported on Corus negotiating this deal back in May 2016). Corus remains in control of the channels until the deal is closed, which Bell predicts will happen in mid-2018.

From Bell’s statement:

“The addition of Séries+ and Historia perfectly complements our broad slate of French-language channels, further enhancing our competitiveness in the vibrant Québec media landscape,” said Randy Lennox, President, Bell Media. “We look forward to taking Séries+ and Historia further than ever before, reinforcing our commitment to invest and grow in Québec, and deliver even more opportunities for francophone viewers, producers, and advertisers.”

“Bell Media has had a proven track record of investing in original French-language production, commissioning over 530 original productions from more than 70 francophone producers, and representing nearly 2,700 hours of new programming,” said Gerry Frappier, Bell Media’s President, French-language TV and RDS. “Now with the addition of Séries+ and Historia, we look forward to bolstering our commitment to both francophone viewers and the Québec television production community even more.”

The CRTC’s common ownership policy says generally that deals where a company gets control of more than 35% of the viewing share will be reviewed to determine if it’s in the public interest, and anything higher than 45% would generally be denied. According to the CRTC’s latest Communications Monitoring Report, Bell’s English-language services represent about 37% of viewing hours outside Quebec’s francophone market, and 21% in the Quebec francophone market. Corus’s French-language services (which also include Teletoon) represent only 0.4% of Quebec francophone viewing share. So mathematically, the deal would seem to meet the CRTC’s criteria for approval.

But expect those who came out against the Bell-Astral deal, particularly Quebecor, Cogeco and Telus, to argue that this deal calls into question the integrity of the CRTC’s 2013 decision and that it should be denied as being against the public interest.

Since this is a change in ownership, the deal would also be subject to the CRTC’s tangible benefits policy, which requires 10% of the value of television ownership transactions be spent on funds and projects that benefit the broadcasting system. Under this policy, Bell would be expected to spend $20 million on new projects over the next seven years. No tangible benefits proposal has been released yet, but will become public when the CRTC publishes the application for change in ownership.

Corus only purchased these stations (along with the 50% of the Teletoon channels it didn’t already own) in 2014 from Shaw. These two channels were valued (in the CRTC decision to allow the sale) at 144 million. Now Bell wants to buy 100% of the channels back for 200 million.

Quick math says Corus is losing about 88 million dollars if you value the deal based on the price of 50% 3 years ago – or about a 40% net loss (at least up front).

Remarkably, that actually seems like a reasonable price. The channels have apparently stopped producing new content, and the current trend towards skinny basic and cord cutting means that the value of a cable channel is dropping pretty quickly.

I personally think the deal will be rejected by the CRTC. The sale of these channels was offered up in part to mitigate the purchase of Astral. This sort of move looks more like “hey, Corus, can you hold on to this for us for a couple of years until the heats off?” than anything else. The CRTC is the proverbial deaf dumb and blind kid when it comes to this sort of thing, but you can smell this one from a mile away.

I also have to wonder about Bell. They appear to be doubling down on a cable TV strategy that doesn’t seem to work in the face of the public’s tendency to view online, streaming, non-network programming. A couple of hundred million is a drop in the bucket and all, but still, it’s gotta hurt in the long run when these channels end up being all but worthless.

I wonder if Bell is also going after the DHX networks they were forced to sell

I wouldn’t put anything past Bell, but getting an English-language acquisition through the CRTC would be harder than a French-language one because of Bell’s market power in English, and Bell isn’t really in the children’s TV business.

You’re right. But Bell did originally want to hold on to Astral’s kid networks in the original plan for the Bell-Astral merger (which of course would put them over the limit), if I’m not mistaken.
Also, you think they’re any chances Bell is going to do the same thing with Remstar’s MusiquePlus and MusiqueMax? After all, they are pretty much the French counterparts to Much, and that would work well for synergy here (Discovery/D and Space/Z). This is assuming Bell just buys those channels and not all of Groupe V.

Also, you think they’re any chances Bell is going to do the same thing with Remstar’s MusiquePlus and MusiqueMax? After all, they are pretty much the French counterparts to Much, and that would work well for synergy here (Discovery/D and Space/Z).

Unlike the other French-language specialty channels in the Bell-Astral mix, MusiquePlus and Musimax (now Max) were money-losers, which is why they were sold. There have been rumours since Day 1 that Bell might buy V, and V’s recent issues will certainly reignite them, but I’m not sure Bell wants to take that kind of financial risk.

Also, though MusiquePlus and MuchMusic share a similar background, both have strayed away from music programming and there isn’t much synergy left to exploit.